The aggregate net income of 10 Saudi-listed banks rose by 11.8 percent year-on-year (YoY) to 70.1 billion Saudi riyals ($18.69 billion), boosted by higher net interest margin (NIM) and lower impairment charges.

Operating income jumped by 9.5% YoY, while impairment charges fell 1.1% YoY, consultancy firm Alvarez & Marsal (A&M) said in its 2023 banking pulse report.

Overall, the return on equity increased to 14.5 percent, while the return on assets stayed constant at 2%. 

Loans & advances (L&A) growth outpaced the deposits growth last year, growing 10.6% YoY. Total customer deposits increased by 7.8% YoY. Consequently, the loan-to-deposit ratio increased by 2.5% YoY to 99.2%.

However, liquidity came under relative pressure in 2023 as loan growth outpaced deposit growth amid high-interest rates.  

During the year, deposits from government-related entities reached a record high at 31.2 percent (2022:28.4%) of total Saudi bank deposits, accounting for 68.2% of the total deposit increase in 2023.  The resulting increase in money supply helped moderate the liquidity conditions in the domestic banking system.

"Moving forward, we expect a positive outlook for Saudi banks with prospective loan growth, improving asset quality, and well-capitalised books," said Asad Ahmed, Managing Director and Head of Middle East financial services at A&M.

"Given the upcoming scenario of interest rate cuts by the second half of 2024, we anticipate that NIMs will remain stable at around 3% during the year," he added.

The 10 largest listed banks analysed are Saudi National Bank, Al Rajhi Bank, Riyad Bank, Saudi Awwal Bank, Banque Saudi Fransi, Arab National Bank, Alinma Bank, Bank Albilad, Saudi Investment Bank and Bank Aljazira.

(Editing by Seban Scaria seban.scaria@lseg.com)